Commissioner of Corporations & Taxation v. Tousant

The taxpayer, on June 23, 1937, was the owner of one hundred shares of seven per cent cumulative preferred stock and five hundred shares of Class C common shares in a certain association or trust, the beneficial interest in which was represented by transferable shares. On that day, in order to reduce the capitalization of the trust to eliminate a capital deficit, which prevented the payment of dividends under the terms of the trust, a plan of reorganization was approved and carried out by the shareholders. In accordance therewith the taxpayer surrendered her old shares in exchange for one…